2. DELOITTE – Tracking the trends 2014
1.Mining productivity hits new lows
2.Market imbalances wreak commodity price havoc
3.Exploring the innovation imperative
4.Debt up, deals down and juniors fight for survival
5.Record impairments call capital allocation practices into question
6.Local community demands intensify
7.Government relations marked by rising hostility
8.Zero tolerance regulatory environments complicate compliance
9.From zero harm to zero fatalities
10.The talent gap widens into executive suites
The top 10 issues mining companies will face in 2014
“It’s not a
pendulum
swing, it’s a
seismic shift”
3. Innovate or face the Consequences!
• Strategic Planning and Thinking
• Asset Allocation
• Government and Community Relations
• Ability to secure Funding for growth Projects
• Mitigate risk of Commodity Price fluctuations
• Cost Management
• Improved Management of People and
Processes
• Raise Productivity
• Improve Safety
• Reduce Operational Risk
• Innovative Talent strategies
There’s no doubt the mining industry is experiencing tremendous pressure on costs. But cost constraints often
lead to innovation. Mining has grown bigger over the past 200 years – bigger plants, bigger trucks, bigger blasts.
But the industry itself hasn’t evolved much. Now is the time to make fundamental and dramatic changes.
Glenn Ives, Americas Mining Leader
4. Responding to the Global Challenge
•Many Miners can no longer wait for Peaks in Commodity
Prices to make up for questionable Business Practices
•TMS has pioneered an innovative Approach to solving
Problems and continues to evolve this Approach through
Practice and Research
•Over the last decade TMS has helped
mining organizations address the
challenges outlined in the 2014
Deloitte report
•The challenges are not new but have
been exasperated by instability in
Commodity prices
•The Depletion of Resources is
causing Costs to rise while
Productivity is falling
5. Cost Cutting ≠ Cost Management
•Reactive cost cutting is not sustainable
•Cost Creep tends to reset spending to historical
levels
•Redundancies often need to get rehired at
additional costs
•Focus must be on Return on Capital Employed
(ROCE) and Shareholder Value
•Shifting from Asset Expansion to Operational
Excellence
•Maximize Cash Flow from existing Assets
•Improve Productivity through better Management,
Systems and Technology
Reducing costs over the long
term requires mining
companies to prepare for a
hard campaign of changing
the way they do work. This,
in turn, should spur them to
look closely at their culture
to determine if that needs
changing too.
Andy Clay, Managing
Director, Venmyn Deloitte,
South Africa
6. The TMS Solution to improve Asset Performance
• Cost Management to decrease all-in cost and improve cash flow
• Strategic Business Planning to optimise the capital allocation for long-term benefits
• Effective People Management to mitigate the long term skilled shortage
• Managerial Capability and Accountability at all levels to deliver the results expected and
reduce operational risk
• Quality Production Management at the mine level to improve a manageability of the
operations
• Detailed Knowledge of the primary and Support Value Streams to optimise the value
generated by the business
• Capital Project Management to ensure the delivery of essential capital projects
Systematic Improvement of Mine Business Effectiveness
7. Mine Effectiveness Improvement Programme
•Short term Financial Performance
• Improve short term Cash Flow with “quick wins”
• Increase Asset Value
•Sustaining Short Term gains over the Long Haul
• Introduce systemic Improvements to boost Effectiveness
• Cultural changes to raise Productivity and reduce Risk
•Better Management for better Results
• Effectively manage People, Structures and Work
• Improved Decision Making reducing Operational Risk
• Optimal Organisation Structures with clear Accountability from Top to Bottom
• Identification and Development of High Potential to fill Talent Gaps at all Levels
• Reduced Reliance on “foreign” Talent to cut Costs and improve Community
Relationships
8. Multi Dimensional Nature of the Effectiveness
Improvement Programme
• а
Mine Planning
Effectiveness
Mine
Organisational
Effectiveness
Mine Technical
Effectiveness
Mine Economic
Effectiveness
Mine Long Term
Effectiveness
The Elements of Mine Long Term Business Effectiveness
Mine Short Term Effectiveness Management
Mine Long Term Effectiveness Management
Ensure maximum
economic return
from the planning,
organisational and
technical systems of
the mine
(quick wins) - short term activities that focus on identifying the opportunities for
optimising cost and increasing the value of the mines and their delivery within a short
period (up to 1 year). Such initiatives do not require system / cardinal changes
Ensure an availability of the
mine production management
system for improving the key
mine effectiveness indicators
on a constant basis every year
to sustain the short term
achievements
Long term activities that focus on sustaining quick, short term results and that will require systematic / cardinal
improvement of operational and management systems of the mines within the long term period (to 3-5 years)
9. Mine Effectiveness Improvement Programme
Tasks:
• Analyse and optimise the current initiatives in regard to
improvements in the effectiveness of the mines (cost
and value)
• Identify the shortfalls in the current approach to
manage the cost and value of the mines
• Define key strategic initiatives to improve the cost and
value of the mines with clear and feasible advantages of
the initiatives
• Train managers at all the levels of the mines on various
methods to improve cost and value
• Provide support to the managers in their practical
application of the methods learned and achievement of
feasible economic effect.
• Allocate accountabilities for managing cost and value
(effectiveness) among the Managers at all levels
Key Mine Effectiveness Indicators
Mine Planning
Effectiveness
Ensure effective planning of all functions of the mine at various
planning horizons, starting with hourly and finishing with long term
plans (life of mine)
M2P for the mine > 90% in all
planning horizons from hour
to 3-5 years
Mine Organisational
Effectiveness
Ensure minimum required conditions (structure, people,
management) of organisational effectiveness for delivering the mine
plans (short- and long-term) utilising mine employees at their full
potential
Mine Organisational
Effectiveness Index > 90%
Mine Technical
Effectiveness
Ensure efficient utilisation of the mine’s technical resources for an
achievement of maximum return on equipment and technologies
Mine Overall Equipment
Efficiency Index > 45%
Mine Economic
Effectiveness
Ensure maximum economic return from planning, organisational
and technical systems of the mine
General Economic
Effectiveness Index > 1
Mine Long Term
Effectiveness
Ensure an availability of the mine production management system
for improving the key mine effectiveness indicators on a constant
basis every year to sustain the short term achievements
Mine Production System
Effectiveness Index >90%
Objective: Define and deliver a set of improvement activities to optimise the cost and increase the value of the assets
to achieve feasible economic effects in short- and long-term perspectives
10. Activities
Feb,2014
Mar,2014
Apr,2014
May,2014
June,2014
July,2014
Aug,2014
Sept,2014
Oct,2014
Nov,2014
Dec,2014
Jan,2015
Feb,2015
Mar,2015
Apr,2015
May,2015
June,2015
July,2015
Aug,2015
Sept,2015
Oct,2015
Nov,2015
Dec,2015
Jan,2016
Feb,2016
MineShortTermEffectivenessmanagement
Express analysis of the Mine Business Effectiveness based one Mine
Stage 1 – Analysing and Optimising Mine Expense Profile
• Analysis and identification
• Implementing initiatives
Stage 2 – Expert Cost & Benefit Analysis
• Analysis and identification
• Implementing initiatives
Stage 3 – Accountable Cost & Benefit Management
• Module 1 – Developing Minimum Required Conditions of Organisational Effectiveness
• Module 2 – Back to Basics
• Module 3 - Optimisation
• Module 4 – Linking optimisation with budget
• Module 5 - Implementation
MineLongTermEffectivenessManagement
Phase 1 – Analysing the effectiveness of the current elements of the Mine Production management System
Phase 2 – Designing the improved Mine Production Management System
Phase 3 – Implementing the improved Mine Production Mangement System
• Short Term Initiatives to improve Mine Production Management System
• Long Term Initiatives to improve Mine Production Management System
Phase 4 – Audit the Effectiveness of the Mine Production Management System implemented
Sample Implementation of such a Programme in one mining company
• The use of highly qualified external experts for auditing the key mine
systems and processes
• Total value of short term cost reduction and value benefit up to $263M,
including:
• $89M within one year (2014) – short term initiatives and additional benefits,
including $35M in the processing plants (improvements in extraction)
• $76M US additional benefits (2015)
• Optimising the number of employees in the underground mine (currently 850, target
450 employees) by optimising equipment and improving mine planning
• Strong downward trend in both cash costs and all-in sustaining costs, which were
down 17% and 7% respectively on Q2 2013 and 28% and 25% respectively on Q3
2012.
• Located in Africa
• 4 mines
• London Stock Exchange – FTSE250
• 5 000 employees
• Income - $1.087B
• 600 000 ounces per year
11. Activities
Feb,2014
Mar,2014
Apr,2014
May,2014
June,2014
July,2014
Aug,2014
Sept,2014
Oct,2014
Nov,2014
Dec,2014
Jan,2015
Feb,2015
Mar,2015
Apr,2015
May,2015
June,2015
July,2015
Aug,2015
Sept,2015
Oct,2015
Nov,2015
Dec,2015
Jan,2016
Feb,2016
MineShortTermEffectivenessmanagement
Express analysis of the Mine Business Effectiveness based one Mine
Stage 1 – Analysing and Optimising Mine Expense Profile
• Analysis and identification
• Implementing initiatives
Stage 2 – Expert Cost & Benefit Analysis
• Analysis and identification
• Implementing initiatives
Stage 3 – Accountable Cost & Benefit Management
• Module 1 – Developing Minimum Required Conditions of Organisational Effectiveness
• Module 2 – Back to Basics
• Module 3 - Optimisation
• Module 4 – Linking optimisation with budget
• Module 5 - Implementation
MineLongTermEffectivenessManagement
Phase 1 – Analysing the effectiveness of the current elements of the Mine Production management System
Phase 2 – Designing the improved Mine Production Management System
Phase 3 – Implementing the improved Mine Production Mangement System
• Short Term Initiatives to improve Mine Production Management System
• Long Term Initiatives to improve Mine Production Management System
Phase 4 – Audit the Effectiveness of the Mine Production Management System implemented
Sample Implementation of such a Programme in one mining company
• Implementing the Accountable Management System that focuses on improving
people, structure and work management
Organisational structure - Significant changes to staffing structures and levels
resulting in a reduction of 27% of international employees in 2013 and a reduction
of 37% in contractors on site.
• Improving the system of integrated planning :
• Long term mine planning
• Capacity planning with constraints
• Short term planning and scheduling
• Integration of maintenance planning
• Delivery of the production plan for the first time in 3 years
• Reduction in cost below the planned indicator of $925 per ounce
• Located in Africa
• 4 mines
• London Stock Exchange – FTSE250
• 5 000 employees
• Income - $1.087B
• 600 000 ounces per year
12. If YOU had started last Year YOU would see the
Improvement now
1.October, 2012 - the start of the analysing the
current business effectiveness (operation review)
2.January, 2013 – the start of the implementation of
the mine effectiveness improvement programme
3.May, 2013 – the announcement of the first results of
the implementation of the programme
4.July, 2013 - the announcement of first Half year
(2013) result
5.October, 2013 – the announcement of the production
–financial results for the third quarter and
intermediate results of the implementation of the
effectiveness improvement programme (cost
reduction and additional benefits generation)
2 3 4
5
13. For more Information
go to
www.totalmanagementsys.com
or send Questions and/or Comments to:
info@totalmanagementsys.com
